◈ GLOSSARY · INVESTING
Capital Gain.
A definition, in plain English — with the books that teach it.
Reviewed by ClearValue Editorial Team · Jun 27, 2026
◈ DEFINITION
What it means
Definition
The profit from selling an asset for more than you paid. Held for a year or less, the gain is short-term and taxed as ordinary income (up to 37% federal). Held longer than a year, it's long-term and taxed at preferential rates — 0%, 15%, or 20% depending on your income bracket. Holding period is the lever most investors underuse.
◈ IN PRACTICE
Example
You buy a stock for $5,000 and sell it eleven months later for $8,000 — $3,000 short-term gain, taxed at your marginal rate (say 24% = $720). Sell one month later instead and the same $3,000 becomes a long-term gain taxed at 15% = $450. Same trade, $270 saved by waiting a month.